A Profit and Loss (P&L) report shows how much money your business has made in income and how much it has spent over a specific period. It is a vital tool for tracking your business performance and staying on top of your financial health. 📆
What the report shows
The report breaks down your business financials into clear categories:
Income: Your total earnings from sales, interest, and any other incoming funds.
Expenses: The day-to-day costs of running your business, including sales costs and general admin.
Operating profit: Your total income minus your expenses, showing your baseline business earnings.
Non-tax-deductible: Business expenses that cannot be used to reduce your tax bill.
Taxable profit: The final profit figure that HMRC will use to calculate your tax. 📊
Why your report is important
The report helps you manage your obligations depending on how your business is set up:
For limited companies: You can use these figures to prepare your annual accounts, keep track of your running costs, and calculate your Corporation Tax. 🏢
For sole traders: It makes it easy to understand your income, track your expenses, and view the exact taxable profit figure you need for your Self Assessment tax return. 👤
💡 Note: Your P&L report only tracks your income and expenses. It does not show what your business owns or owes (known as assets and liabilities). You can find those figures on your Balance Sheet instead.